Square Enix’s 30% plunge may be merely the beginning of something worse

Square Enix Holdings Co. has lost about $2 billion in value since the release of Final Fantasy XVI, the newest installment in its popular video game series, amid mixed reviews. 

Currently, investors are unsure if one of the most remarkable runs in the games industry will continue.

The Tokyo-based company has long relied on its celebrated series to propel expansion, a formula that has increased its value fivefold in the decade leading up to the release of the next Final Fantasy in June. However, the game's sales were disappointing, and problems worsened in August when the company reported a significant profit loss. 

Shares dropped by double digits, a dozen analysts following the stock cut their price targets, and long-term investor Sumitomo Mitsui Trust Asset Management Co. slashed its investment in the game company.

One of the most well-known brands among console and mobile gamers, Square Enix has slipped behind rivals like Capcom Co. and Activision Blizzard Inc. in terms of market value due to a string of failures in its efforts to create another smash-hit series to support sales. 

According to fans, analysts, and developers who have worked at or with the studio, the company's downfall provides the industry with important lessons about the value of quality control and product planning.

Takashi Kiryu, the company's recently appointed chief executive officer and a 48-year-old Massachusetts Institute of Technology graduate who previously worked at the country's largest advertising agency, has stated his intention to reduce the number of smaller titles and outsourcing in order to concentrate on high-profile games with greater potential for success and increase the company's profitability.